Justia Federal District Court Opinions

This is an appeal from orders awarding fees to two attorneys in an interpleader action to determine rights in a fund. Each attorney appeared for named defendants who were, respectively, sued as representatives of a class of claimed beneficiaries of the fund. The fees were ordered paid out of the fund. The appeal has been taken by other named defendants who also purport to represent some or all of the beneficiaries.

Much of the relevant history of the case appears in opinions on earlier appeals in the same case, 374 F.2d 820 (7th Cir. 1967), and 448 F.2d 501 (7th Cir. 1971); and in a related case, United Steelworkers of America, A.F.L.-C.I.O. v. Hamilton Steel Products, Inc., 404 F.2d 878 (7th Cir., 1968).

Hamilton Steel Products, Inc., on the verge of bankruptcy, terminated employment of its factory employees in late 1964, and failed to make the payment required December 15, 1964 on an annuity policy maintained as a means of funding its pension plan. Union Central Life Ins. Co., the insurer, brought this interpleader action September 2, 1965 to determine the rights in funds deposited with it by Hamilton.

Hamilton and the bankruptcy trustee were defendants. Other named defendants were sued in their own behalf and as representatives of others in several classes. Class B included a number of Hamilton employees in whom certain Prior Benefits under the policy had already been vested, payable upon termination of employment. Ultimately all members of Class B were named defendants. Class C included all factory employees of Hamilton as of December 15, 1964; Class D, all who had been terminated on certain dates shortly before December 15. The pension plan had been the product of collective bargaining with the Steelworkers union. Officers of the local and a district representative were named as defendants in their own behalf and as representatives of union members and officers as a class. All members of Class B were members of Class C, and, all members of Classes B, C, and D were members of the union or at least employees in the unit for which the union was the collective bargaining representative.

On September 20, 1965, attorney Kaye, one of the attorneys whose fees are at issue, entered an appearance for 18 (later 20) of the 32 Class B defendants, and three days later for the named defendants representing Class C. On September 27, 1965, attorneys Cornfield and Feldman (who are attorneys for the union) entered an appearance for the named union officer defendants. No one then appeared for the defendants representing Class D.

There seems to have been universal agreement that the members of Class B were entitled to receive the payment of Prior Benefits. On April 28, 1966 the district court ordered payment to those members of Class B for whom Kaye had appeared. Kaye had an agreement with some, apparently 20, of the members of Class B that he would be paid a fee equal to 20% Of the aggregate recovery provided it exceeded $25,000. At one point he indicated he would be willing to accept a fee 10% Of the entire Class B fund, apparently on the supposition that Class B recovery would be about $45,000 and 10% Thereof would be almost as much as 20% Of $25,000.

The union attorneys, in the name of the union, asserted that the limitation of the award to those members of Class B represented by Kaye was discriminatory, and moved that the decree be vacated or amended. A resulting contest over the union's role in the enforcement of the rights in the fund of those included in the bargaining unit led to the union's unsuccessful attempts to intervene in its own name in this action, Union Central Life Ins. Co. v. Hamilton Steel Products, Inc., 374 F.2d 820 (7th Cir., 1967), and to commence a separate action for declaratory judgment. United Steelworkers v. Hamilton Steel Products, Inc., 404 F.2d 878 (7th Cir., 1968). In any event, the district court ultimately, June 9, 1967 (over opposition of Mr. Kaye) amended its first decree so as to require payment of Prior Benefits to all members of Class B, and these amounts were later paid. The record does not disclose further reference to attorney Kaye's agreement with some of the members of the group for a contingent fee for his services as to Class B.

On March 21, 1969, attorney Dunne, whose fees are also presently at issue, appeared for the defendants named as representatives of Class D.

Originally the trustee in bankruptcy had claimed all the fund remaining after payment of Prior Benefits to Class B. On October 1, 1969, however, without any submission of that issue to the court for decision, he modified his position and apparently conceded that 27 (later 25) members of Class C who had completed 15 years of service for Hamilton by December 15, 1964 had rights in the fund even though they had not attained the age requirement of 65 years. He asserted the right to any excess remaining after satisfying the rights of the 15 year group. The union officer defendants agreed that the 15 year group should have prior claim, but contended that any excess should go to the benefit of the other employees. It developed that if the fund were to be applied first to fulfill the anticipated pension rights of the 15 year employees, there would be a deficit rather than a surplus.

It seems, at least by hindsight, that the 15 year group should have been treated as a separate class or sub-class, at least from that time forward. We shall refer to this group as Subclass C-1 and the remainder of Class C as Subclass C-2. The difficulty of simultaneous representation of Subclass C-1 and Subclass C-2 was later recognized by this court. 'Both the union representatives and the Trustee have capably and strenuously, however, advanced the interest of (Subclass C-1), without which we might well have been of the opinion that their interests had not been fairly represented.' 448 F.2d at 504.

On February 27, 1970, the district court entered judgment awarding the then balance of the fund, $119,339.02 to Subclass C-1, divided ratably according to the difference between the present actuarial value of anticipated monthly benefits and the prior benefits already received. Kaye and Dunne filed appeals on behalf of their clients, although, of course, Kaye's clients were nominally the representatives of Subclass C-1 as well as C-2. This court reversed the award of the entire balance to Subclass C-1, and remanded for recalculation of benefits in which all members of Classes C and D would share. Appellants were allowed to recover costs on appeal from the fund.

On remand the parties were able to agree on a formula for calculation of ratable shares in the fund (with a minimum payment of $50 to any individual), except that the union officer defendants opposed the award of attorney fees to Kaye and Dunne and subtracting such amount from the entire fund before computing the respective shares. The district court, without adverting to the objections, allowed Kaye fees of $32,210.50 and unreimbursed expense of $154.00, allowed Dunne fees of $8,000.00, and expense of $31.50, and subtracted these amounts from the fund before computing the shares of the beneficiaries. The fund had increased by the accrual of interest.

The result of the appeal and the impact of the fees may be summarized as follows:

                 Share awarded                           Portion
        No.      by judgement       Share reflecting     of fees        Net
        in                                                taken
Class  class     appealed from     decision on appeal   from share  distributi-
                                                                        on
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C-1    25      100%   $119,339.02  38.44%  $ 49,489.49  $15,460.37  $34,029.12
C-2    158            none         59.52%    76,628.59   23,938.65   52,689.94
D      28             none          2.04%     2,626.22      820.48    1,805.74
                                           -----------  ----------  -----------
                                            128,744.30   40,219.50   88,524.801

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